October, 2015

Retirement Savings

Australia’s retirement savings gap is one of the biggest in the world!

  • Only 53% of couples and 22% of single people are on track to achieve a comfortable level of retirement income with their savings, according to an in-depth study of the adequacy of retirement savings.
  • The Australian Bureau of Statistics recently released the highest life expectancy estimates ever recorded in Australia, indicating that many people easily live for another 20 years after they retire at 65.
  • A survey of people’s attitudes regarding retirement savings shows that, while Australians expect to spend over 20 years in retirement, their money will run out after only 10 years, leaving them to rely on the age pension.
  • For most people, their superannuation is not sufficient to fund a comfortable retirement, even though they have contributed to their funds for most of their working lives.

With this in mind, it is essential that you take action to maximize your income for your retirement savings.  Obviously the earlier you start preparing for retirement, the more options you have to set a course that suits you.  It’s never too late to boost your retirement savings and there are actions that you can take no matter what your age.  The important thing is to take action now and speak to a professional who can review your situation and come up with a tailored strategy that will work for you, both now and in the future.

Avoid retirement planning mistakes

Retirement is a lot tougher than it once was.  Gone are the days when a retiree paid off the family home, put away some savings, made a small investment or two and lived happily ever after.  In this era, it takes careful planning to have enough money for retirement savings.  If you want a comfortable retirement you should avoid the following crucial mistakes.

1. Failure to plan

As the old adage goes, “If you fail to plan, you plan to fail.”  The 2011 ANZ Survey of Financial Literacy in Australia, which is the ANZ’s most recent, revealed that only 37% of Australian adults provided an estimate of how much money they would need for retirement savings.  A good plan should include which risks you deem to be acceptable, which investments you want to make, how much you have to invest, your preferred cash flow and what insurance you need to protect your investments.

2. Failure to formulate a budget

If you want to achieve investment success and ensure your goals for your retirement savings are met, you should formulate a budget and stick to it.  A budget accomplishes two things:  it indicates where your money is going and earmarks a set amount for your future savings.

3. Failure to invest

Keeping your money in the bank may not keep you abreast of inflation.  Investing in property or shares generally generates better returns.  How you invest depends on your personal risk profile and the goals that you have.

4. Going it alone

You need a professional on your side to truly maximise your retirement savings and investments; someone who is trained to consider a plethora of factors that pertain to generating wealth for retirement.

Don’t leave your retirement plans to chance – make sure you speak to one of our team today to discuss your  financial goals and retirement plans.  We can help you achieve your goals and maximize your wealth for a comfortable retirement.  Call us today on 9204 3733 for an obligation free review.

Risk of Innovation

Face It!  It’s not possible to eliminate the risk of innovation. 

One of the most often cited reasons for not embracing innovation is that it is too risky.  Unfortunately, it is not possible to eliminate the risk of innovation because prototyping or testing often comes with a high cost.  Combined with the time spent, the cost can be rather high for an unknown outcome.  Yet, by failing to embrace innovation, you are putting your business at a high risk of being left behind and becoming obsolete.  There is no way to eliminate the risk of innovation, but there are ways to reduce it.

It’s easy to understand the dilemma.  Business owners don’t want to put themselves in a position where they are wasting time or money, especially as the economy continues to climb out of the sinkhole that has existed for the last few years.  Yet businesses that don’t innovate will suffer serious consequences which could cause irreparable damage.  So what can be done if the risk of innovation cannot be eliminated?

Here are four tips that may save you time and money:

1. Clear up the fuzzy front end

Often, much of the time spent on innovation is in the stages that companies are more comfortable with – developing prototypes, doing some research and development plus testing – definitely the more fun stages!  But when companies have a new idea, and this is the starting point, there are tremendous risks already because the most important part of the process – clearing up the fuzzy front end – has been left out.

Think of the fuzzy front end of innovation as how your eyes feel after visiting the eye doctor – everything is blurry and it’s impossible to make sense of anything because there is no way to bring clarity or focus on anything you look at.

Ideas start in your brain.  This is a fact that cannot be denied, but it’s what you do with your ideas that is important.  When you come up with a good business related idea, write it on a sticky note, napkin, back of an envelope or store it in your phone.  To really be effective, use a little notebook that can be carried around with you.

Now, what normally happens next is that you begin figuring out how to implement your new idea.  Say it’s a solution to a processing problem and you’ve reached the “how will it work” stage - it’s important to consider the next three key points first.

2. Which problem is being solved and for whom?

There are two basic types of problems – big problems that don’t happen very often and small problems that happen all the time.  Which type are you solving and for whom?  It is important to write down which problem your new innovation will solve and who is most interested in the solution.

If the problem cannot be identified, then your idea probably needs to be set aside for a later time.  What did you lose?  Maybe thirty or so minutes thinking about it, no expenses were incurred and there was no loss in production.

 3. What are the financial benefits/drawbacks of this new idea?

Recently, a group of top notch innovators spent a day brainstorming and came up with some great new ideas.   At the end of the day, they chose two that they wanted to work on for a couple of weeks.

However, when they did “the math” on one of the ideas, they quickly realized that changes needed to be made.  Their idea was going to net them a relatively small return of just over $500K and they knew they could do better.  When they reworked the idea, the potential return on investment increased by a factor of 10!

Doing “the math” involves:

  • Examining how many potential customers there may be as a whole.
  • Considering how many of them can realistically be reached (through advertising, direct contact, etc).
  • Considering how many of those who can be reached will purchase.
  • Considering repurchase situations (think vacuum cleaners – customers will repurchase bags, filters and belts).  If applicable, how many times in a year will customers repurchase and how much will each transaction cost?

Take all of these factors into consideration when working on an idea, as “the math” could kill or advance it, depending on your expectations and the results.

4. Identify the potential roadblocks

Another key step you should take to reduce risk is to identify potential roadblocks for a new innovation.  Say it relates to a new product - one important step is to find out whether or not your customers are interested.  Don’t make the mistake of becoming so fixated on the new product that you ignore those around you who are warning that it won’t fly.  Ultimately, a lot of time and money will be wasted until you discover, one way or another, that your customers don’t want the product.

Another roadblock might be whether or not the required materials can be obtained if the new product needs to be manufactured.  Technology could be a roadblock.  Skilled employees could be a roadblock.  There are other examples – too many to mention here – but the important thing is to identify them now.

Brainstorm with your team to determine whether or not there is a way around each roadblock.  If there is, work through it.  If not, the idea may have to be shelved for a while.


There are other steps that can be taken to reduce the risk of innovation, but if you follow those listed above you’ll clear up that fuzzy front end.  You may spend a bit of time and money to clear away a roadblock, but the cost won’t be huge.

Before you invest your time and hard earned money in developing new ideas why not talk them through with us?  We are business advisors and tax accountants who can help simplify your processes, work through the numbers, save you time and money and help reduce the risk of innovation.  Fill in the form below for an obligation free meeting.


Understand your business risks in Perth

A lesson some business owners learn the hard way is that, in today’s global operating environment, risks appear to be increasing exponentially so it is important that you understand your business risks in Perth.  It takes only one trial by fire for a business owner to recognise the importance of basing each decision on risks versus rewards.

It’s important that you maintain a steady focus on this to understand your business risks in Perth.  This way, you can avoid any activity that is very high risk and avoid a loss that can drastically reduce your efforts to increase the company’s performance, its net worth and the value of the company’s shares.

A business owner must take steps to minimize the impact of potential risks on their business to protect the company’s operational and financial wellbeing.  To do so, you must learn to identify and classify each business risk depending on its origins and characteristics.

The Origins of Business Risks

A business owner assumes business risks ( i.e. the possibility that actual returns will be more or less than expected returns) the moment the company’s lights are turned on and its doors are flung open.

The types and scale of the risks that affect the long-term success of a business will depend on the company’s operations and industry.  For example, new market entrants, shifts in consumer demand and economic downturns are risks for some companies in the media and entertainment industry.  In turn, companies in the mining industry may deal with a shortage of skilled labour and access to infrastructure.

Make sure you identify, classify and understand your business risks in Perth and have strategies in place to minimize their impact.  Summarized below are the major types of risks most businesses will face at some point.

1. Financial Risk

This can impact on your company’s cash flow and income.  Because investors may value your business by discounting its projected cash flows, financial risk can also affect shareholder wealth.

Financial risk includes liquidity which can affect retained earnings and capital if a company is unable to meet its current liabilities without suffering significant losses.  Also included is a market risk - changes in commodity prices, credit spreads, interest rates or equity prices.

Financial risk also comprises company reporting risk - the possibility that a company reports on accounting, tax or regulatory data that is inaccurate or reported in an untimely manner.  Other financial risks include credit risk (the inability to meet financial obligations when due) and capital structure risk (a company’s debt to equity ratio, which is determined by the way a business finances its operations).

2. Strategic Risk

A company’s strategic risk is determined by its business functions, investor communications and operating environment (which is affected by the markets in which it buys and sells goods and services).  The operating environment  also depends on government regulations and compliance requirements that govern a company’s operations and markets.  In turn, unfavourable changes in the supply or demand of products or services also affect a company’s strategic risk, as do the competitors that vie for sales and supplies in the company’s chosen markets.

3. Operational Risk

Operational risk (process risk and innovation risk) concerns a company’s internal activities.  Process risk relates to resources such as employees, equipment, materials and business processes that support production processes or affect a company’s continued operations.

In turn, innovation risk depends on the success or failure of performance improvement initiatives or business process upgrades.  Innovation risk also relates to the degree a company’s investment in incremental product improvements is rational and its approach to the development of new products.

Business owners consider a number of criteria during a decision making process, not the least of which are business risks.  To best ensure a business doesn’t suffer a catastrophic loss that puts continued operations in doubt, owners must manage the business risks.  A first step in the process is identifying and classifying relevant business risks including strategic, financial and operational risks.

If you would like help to identify and understand your business risks in Perth, the major risks to your business and the best ways to minimize their impact, call us today.  We are specialist business advisors and accountants and offer an obligation free review to help keep your business on track.